The National Credit Union Administration has granted its third federal charter of the year, and another group is targeting a 2024 launch.
The NCUA said Wednesday that it granted a charter and share insurance fund coverage to Young Community Federal Credit Union of Shively, Kentucky.
The credit union is sponsored by the Young Nonprofit Foundation, a local charitable organization focused on providing low-income Kentucky families with access to quality childcare and education. Young did not immediately respond to inquiries for this story.
Meanwhile, a group in Maryland wants to launch a new credit union to fill what it sees as a credit and lending void for the African American and Hispanic communities in the southern part of the state.
The Maryland group is led by Troy Smith, CEO of G1 Investment, a private mortgage bank focused on financing rental properties.
Smith said the group's organizers have met periodically for the past eight months and compiled a "proof of concepts" application to be submitted to the NCUA. The application will be given to the regulator by the end of this week, Smith said, with the hopes of preliminary approval for a federal charter by the beginning of 2024.
Its field of membership will include Charles, Calvert and St. Mary's counties in addition to southern Prince George's County.
"Our mission is to financially strengthen the southern Maryland community by providing financial literacy workshops, entrepreneurship training and investment educational seminars," Smith said. "We want to ensure access to responsible credit, savings and business services delivered in an environment filled with hospitality and compassion."
Smith said the group plans to empower southern Maryland's underserved and distressed communities by ensuring that their savings dollars can go to work within the communities where the dollars are generated.
"This credit union will support the local business community by providing business services and loan products to keep the business community at the cutting edge of service and technology," he said. "We will educate our members on consumer laws and their economic rights."
The NCUA announced in April that it had awarded a federal charter to
Since 2014, the NCUA has
NCUA Vice Chairman Kyle Hauptman, who has made it a priority of his to make it
"I know that the people working to start a credit union are volunteers. Resources, including their time, are limited, so this shouldn't take five years. Organizers should always know where they are in the process," he said in an email.
Sam Brownell, founder of the consultancy CU Collaborate, said the main reason there is a lack of new credit unions comes down to capital — both the way donated capital is treated under the tax code and how much capital the NCUA requires new credit unions to have.
The amount of capital necessary generally requires wealthy benefactors, Brownell said.
"And if you assume wealthy benefactors typically are self-interested, it simply isn't rational for them to donate capital to charter new credit unions," Brownell said. "That capital isn't tax deductible, no matter how much relief credit unions provide to the poor, the distressed or the underprivileged."
Smith said the group is trying to raise at least $10 million in startup capital.
Brownell suggested that the NCUA should reach out to the Internal Revenue Service to try to establish a memorandum of understanding that capital donated to credit unions designated as low income and/or those certified as community development financial institutions be tax deductible.
"I think that would make all the difference in the world," he said.
Otherwise, the NCUA needs to get comfortable chartering new credit unions with little to no capital, with the understanding that many will fail but that they represent a de minimis risk to the share insurance fund and could breathe new life into the credit union industry, Brownell said.
If their credit union is approved, Smith said his group will encourage the careful use of money and other financial resources and assist with providing financial equity to the underserved and disenfranchised members of the southern Maryland community.
"We will work to educate our youth on the purpose and importance of savings and understanding how to handle money responsibly," Smith said.
